In a 2007 survey, the public rated the pharmaceutical industry less favorably than IT, electronic goods, food & beverages, waste collection/recycling, medical devices, telecom, automotives, and personal/beauty products. The only industries that the survey's 1,200 respondents viewed more unfavorably than pharma were those involving oil & gas, chemicals and tobacco.
That was an ominous result because pharma's profitability rests on a base of patent protection and regulation that impede competitive entry and provide insulation from the market. Stated another way, if a substantial part of an industry's profit depends upon an ongoing monopoly/oligopoly bestowed by popularly elected governments, then that industry should regularly try to enhance its image in the public eye.
Pharma appears in the process of ignoring an opportunity to do just that. Shortly before and after last fall's Congressional elections, the industry's lobbying group made it clear that they intend to terminate their short-lived cooperation with the Obama administration's health care efforts and return to their historical support for Republicans. That's unfortunate because if pharma opposes the Republican budget proposals, especially the one from Congressman Paul Ryan, the industry can help mitigate its tattered public image.
The Republican budget proposal by Wisconsin Congressman Ryan is not just a typical political grab-bag with features that include the good, the bad and the irrelevant. Rather it is an entirely unmitigated disaster that offers pharma a chance to establish its bona fides as an advocate for public well being by opposing the entire scheme. In a recent analysis of the Ryan budget, Robert Greenstein of Center on Budget and Policy Priorities called it "a cowardly budget" that takes a "reverse Robin Hood" approach by making "the lion's share of its budget cuts from programs for low-income Americans...even as it bestows extremely large tax cuts on the wealthiest." In the unlikely space of the Wall Street Journal's op-ed page, Princeton economist and former Federal Reserve vice-chairman, Alan Blinder, also labeled Ryan's plan as Robin Hood in reverse.
Leaving aside consideration that Ryan's proposed cuts to Pell Grants, education and basic research would hobble vital investments in America's economic future, pharma could help to improve its unfavorable image merely by taking a public position against those parts of the plan dealing with health care. Ryan's proposal would increase the rolls of uninsured and underinsured people by the tens of millions and effectively ration health care on the basis of income. It would do that in at least two ways, first by repealing the provisions of last year's health care law that extended coverage to 34 million people, and secondly, by cutting an additional $771 billion from Medicaid over the next ten years.
Ryan would then replace the current Medicare and Medicaid system with a voucher to buy private insurance, an idea he euphemistically terms a "defined contribution." That voucher amount would not rise to meet annual increases in health care costs, thereby forcing seniors and modest-income Americans to purchase skimpier and skimpier coverage every year.
Republican slogans notwithstanding, the desire to merely contain the growth of government health care spending does not plausibly seem to be the principal motive behind Ryan's budget because his plan calls for repealing the Independent Payment Advisory Board, the key provision of last year's legislation that was designed to contain Medicare costs.
Blinder and others believe the true intent of Ryan's draconian budget consists of shrinking federal spending as a percentage of GDP to the point of totally crippling many of the government's basic functions. They base this on the fact that the Ryan plan, by 2050, would reduce federal spending to its lowest percentage of GDP since 1951, a year that preceded the existence of Medicare, Medicaid, and the departments of Health & Human Services, Veterans Affairs, Education, Energy, Transportation and Homeland Security.
Looking at the larger context, the Medicaid and food stamps programs that Ryan would shred act as safety nets during economic recessions. By eliminating such programs the Ryan plan would add to the distress of unemployed and underemployed people during hard times and, simultaneously, it would also create the largest upward redistribution of income in modern American history. Professor Blinder, for example, notes that "72% of Ryan's claimed budget cuts would go to fund tax cuts that overwhelmingly benefit the rich."
Opposition to Ryan's health care plan offers pharma more than an opportunity to enhance its public image. People without adequate health care coverage cannot buy pharma's products, particularly those costing between $50,000 and $200,000 per year for each patient. Pharma companies hope to price many of their new products in this range to make more money from fewer units. So by disparaging Paul Ryan's efforts at budget writing, pharma can both augment its image and expand the public's ability to buy medications. Enabling more customers to buy your products while improving your public image at the same time represents a twofer opportunity that doesn't often occur.
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